Mechanisms for a spatially distributed market

Moshe Babaioff*, Noam Nisan, Elan Pavlov

*Corresponding author for this work

Research output: Contribution to conferencePaperpeer-review

18 Scopus citations


We consider the problem of a spatially distributed market with strategic agents. In this problem a single good is traded in a set of independent markets, where shipment between markets is possible but incurs a cost. The problem has previously been studied in the non-strategic case, in which it can be analyzed and solved as a min-cost-flow problem. We consider the case where buyers and sellers are strategic. Our first result gives a double characterization of the VCG prices, first as distances in a certain residue graph and second as the minimal (for buyers) and maximal (for sellers) equilibrium prices. This provides a computationally efficient, individually rational and incentive compatible welfare maximizing mechanism. This mechanism is, necessarily, not budget balanced and we provide also a budget-balanced mechanism (which is also computationally efficient, incentive compatible, and individually rational) that achieves high welfare. Some of our results extend to the cases where buyers and sellers have arbitrary convex demand and supply functions and to the case where transportation is controlled by strategic agents as well.

Original languageAmerican English
Number of pages12
StatePublished - 2004
EventProceedings of the 5th ACM Conference on Electronic Commerce,EC'04 - New York, NY, United States
Duration: 17 May 200420 May 2004


ConferenceProceedings of the 5th ACM Conference on Electronic Commerce,EC'04
Country/TerritoryUnited States
CityNew York, NY

Bibliographical note

Funding Information:
The authors would like to thank the editor and the anonymous referees for their very helpful comments. This research was conducted when the first two authors were students at the School of Engineering and Computer Science, The Hebrew University, Jerusalem, Israel. It was supported by grants from the Israeli Ministry of Science, the Israeli Academy of Sciences and the USA–Israel Bi-national Science Foundation. The first author (Babaioff) was also supported by Yeshaya Horowitz Association and by a National Science Foundation grant number ANI-0331659. The third author (Pavlov) was also supported the Evergrow project of the EU and part of the work was done while on a visit to the Exystence Institute.


  • Auctions
  • Mechanism Design
  • Spatially Distributed Market


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